November 8, 2017 / 8:29 PM / in a month

UPDATE 2-Darkening outlook sends ProSiebenSat.1 down while rival RTL shines

* Fourth cut in German TV ad outlook this year

* Battles changing viewing habits, cuts in spending by big brands

* Q3 sales up 3 pct, core earnings flat - as expected

* Bankers say management changes and M&A strategy confusing (Adding comments from CEO during earnings call, share reaction and comments from sector bankers and top 20 shareholder)

By Sophie Sassard and Douglas Busvine

LONDON/FRANKFURT, Nov 9 (Reuters) - Shares in Germany’s ProSiebenSat.1 fell by 11 percent to a 4-1/2-year low on Thursday after the broadcaster cut its outlook for revenue and profit for the year and said it wasn’t able to forecast TV advertising revenues for the fourth quarter.

Broadcasters are battling changing viewing habits and cuts in marketing outlays by major consumer brands - headwinds expected to drag overall growth in TV advertising spending in Europe’s largest economy to its slowest since 2011.

ProSieben’s trading update contrasted with domestic rival RTL which raised its outlook on the back of a strong performance in Germany and France.

ProSiebenSat.1 has downgraded its TV advertising outlook three times already this year. It said although initial bookings were up in the current quarter it would only be able to give an overall statement after the year is out.

“ProSieben is suffering particularly in its free-TV business from ratings losses,” DZ-Bank analyst Harald Heider said.

A senior media banker at a London-based advisory firm said RTL has been better at addressing its domestic markets thanks to local production capacities while ProSieben has mainly relied on U.S. content, finding itself competing directly against the likes of Netflix.

As RTL talked up new show formats such as ‘The Golden Brain’, ProSieben wrote off 170 million euros invested in what CEO Thomas Ebeling called non-performing U.S. programming.

“Markets have been bull for a while now so most investors have little tolerance to risk and cut down as soon as bad news emerges,” said a top 20 investor who declined to be named because he is not authorised to speak to the press.

Ebeling lost key executives including chief finance officer Gunnar Wiedenfels, chief Digital Christian Wagner and head of strategy Ralph Schremper over the past 12 months.

CONSOLIDATION IN EUROPE?

Ebeling, 59, didn’t rule out the possibility of sector consolidation but said ProSieben would not be a buyer and that a merger with a peer is not on the cards at the moment.

ProSieben has only spent only a quarter of its 1 billion cash pile for M&A since its 2016 cash call but is looking to raise more money from new investors to develop e-commerce and content production.

Spinning-off the e-commerce and production content operations was seen by one sector banker as a way to make the company more attractive to rivals as competition from global players could push European broadcasters to join forces.

Sources told Reuters in June that Prosieben has held informal talks with a number of peers about possible tie-ups over the past 12-18 months.

ProSieben said group revenues for the year would show a percentage gain in the mid-single digits, down from earlier guidance of a high-single digit increase.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and adjusted net profits would now only exceed last year’s level “slightly” the company said, while they would show a year-on-year decline in the fourth quarter.

ProSieben said revenues rose by 3 percent in the third quarter to 883 million euros ($1 billion) while adjusted EBITDA was flat at 202 million euros.

Both were broadly in line with average expectations in a Reuters poll of analysts.

The darkening outlook overshadowed news earlier on Wednesday that ProSieben’s Red Arrow Entertainment Group had acquired a majority stake in U.S.-based film distributor Gravitas Ventures in a bid to strengthen its content pipeline.

$1 = 0.8628 euros Reporting by Douglas Busvine in Frankfurt and Sophie Sassard in London; Editing by Elaine Hardcastle

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